Current Ratio and Quick Ratio

1. Calculate Current Ratio from the followin g informa tion:

Particulars f Particulars ~

Equity Share Capital 8,00,000 Cash and Cash Equivalents 56,000

Inventories 1,00,000 Trade Payables 60,000

Trade Receivables 1,20,000 Short-term Borrowings (Bank overdraft) 40,000

Advance Tax 24,000 10% Investments 80,000

(CBSE 202;,j
[Ans.: Current Ratio = 3 : l .]

2. Calculate Current Ratio from the followin g informa tion:

Particulars Particulars

Total Assets 20,00,000 Non-current Liabilities 5,20,000

10,00,000 Non-curre·nt Investments .6,00,000

Fixed Tangible Assets
Shareholders' Funds 12,80,000
[Ans.: Current Ratio= 2: 1.]

rds it purchased
3. A compan y had Current Assets oft 4,50,000 and Current Liabilities oft 2,00,000. Afterwa
Current Ratio= 2.09: 1.]
goods fort 30,000-on credit. Calculate Current Ratio after the purchase. [Ans.:

4. Working Capital t 6,00,000, Total Debt t 27,00,000, Non-cu rrent Liabilitie s

t 24,00,000. Calculate
Current Ratio. [Ans.: Current Ratio = 3 : 1.]

of Current Assets and

5. Current Ratio is 2.5, Working Capital is t 1,50,000. Calcula te the amoun t
Current Liabilities. [Ans.: Current Assets = t 2,50,000; Current Liabilities = t 1,00,000.]

18,00,000; Trade Payables t 1,80,000; and Other Current Liabilities are t 4,20,000
.
6. Working Capital is t
Calculate Current Ratio. [Ans.: Current Ratio= 4: 1.]

7. Working Capital t 9,00,000; Total Debts (Liabilities) t 19,50,000; Long-Term Debts t

15,00,000. Calculate

Current Ratio. [Ans.: Current Ratio= 3: 1.]

[Hints: 1. Current Liabilities= Total Debts - Long-term Debts.

2. Current Assets= Working Capital + Current Liabilities.]
Ratio.
8. Current Assets are t 7,50,000 and Working Capital is t 2,50,000. Calculate Current
[Ans.: Current Ratio= 1.5: 1.]
It paid t 30,000 to a
9. Current Liabilities of a compan y were t 1,75,000 and its Current Ratio was 2 : 1.
Creditor. Calculate Current Ratio after paymen t. [Ans.: Current Ratio= 2.21: 1.]

1o. Current Assets t 20,00,000, Inventor ies t 10,00,000, Working Capital t 12,00,000. Calculate Current Ratio.
[Ans.: Current Ratio = 2.5 : 1.]

[Hints: 1. Inventor ies are already included in Current Assets.

2. Current Liabilitie s= Current Assets - Working Capital.].

11. Trade Payables t 50,000, Working Capital t 9,00,000, Current Liabilities t 3,00,000
. Calculate Current Ratio.
[Ans.: Current Ratio = 4: 1.]
[Hint: Trade Payables are already included in Current Liabilities.]
12. Ratio of Current Assets (t 3,oo:ooo) to Current Liabilities ('t 2,00,000) is 1.5 : 1. The accountant of the
firm is interested in maintaining a Current Ratio of 2 : 1 by paying off a part of the Current Liabilities.
compute amount of the Current Liabilities that should be paid so that the Current Ratio at the level of
2 : 1 may be maintained. [Ans.: Current Liabilities to the extent on 1,00,000 should be paid to
achieve the Current Ratio at the level of 2 : 1.]
[Hint: Let the amount of Current Liabilities to be paid = x

t 3,00,000-x
thus, - - - - - = 2 or t 4,00,000 - 2x = t 3,00,000 - x
t 2,00,000-x
X = t 1,00,000.]
13. Ratio of Current Assets (t 8,75,000) to Current Liabilities (t 3,50,000) is 2.5 : 1. The firm wants to maintain
Current Ratio of 2 : 1 by purchasing goods on credit. Compute amount of goods that should be purchased
on credit. [Ans.: Purchase goods oft 1,75,000.]

14. A firm had Current Assets oft 5,00,000. It paid Current Liabilities of t 1,00,000 and the Current Ratio
became 2 : 1. Determine Current Liabilities and Working Capital before and after the payment was made.
. [Ans.: Current Liabilities before Payment t 3,00,000; after Payment t 2,00,000;
Working Capital before Payment t_ 2,00,000; after Payment t 2,00,000.]

15. A firm had Current Liabilities oft 5,40,000. It purchased stock oft 60,000 on credit. After the purchase
of stock, Current Ratio was 2 : 1. Calculate Current Assets and Working Capital after and before the stock
was purchased.
[Ans.: Current Assets after purchase t 12,00,000; Working Capital after purchase t 6,00,000;
Current Assets before purchase t 11,40,000; Working Capital before purchase t 6,00,000.]

16. State, giving reason, whether the Current Ratio will improve or decline or will have no effect in each of
the following transactions if Current Ratio is 2 : 1:
(a) Cash paid to Trade Payables.
(b) Bills Payable discharged.
(c) Bills Receivable endorsed to a creditor.
(d) Payment of final Dividend already declared.
(e) Purchase of Stock-in-Trade on credit.
(f) Bills Receivable endorsed to a Creditor dishonoured.
(g) Purchase of Stock-in-Trade for cash.
(h) Sale of Fixed Assets (Book Value oft 50,000) fort 45,000.
(i) Sale of Fixed Assets (Book Value oft 50,000) fort 60,000.

[Ans.: (a) Improve; (b) Improve; (c) Improve; (d) Improve; (e) Decline;
(f) Decline; (g) No Effect; (h) Improve; (i) Improve.]
17. From the following information, calculate Liquid Ratio:
Particulars ~ Particulars t
Current Assets 4,00,000 Trade Receivables 2,00,000
Inventories 1,00,000 Current Liabilities 1,40,000
~epaid Expenses 20,000

[Ans.: Liquid Ratio = 2 : 1.]

 4.114 Analysis of Financial Statem ents-c ase XII

18. From the followin g informat ion, calculate Quick Ratio:

t ~

Total Debt 12,00,000 Long-term Provisions 4,oo,oo0

Total Assets 16,00,000 Long-term Loans & Advances 1,00,000

Property, Plant and Equipment (Fixed Assets} 6,00,000 Inventories 1,90,000

Non-current Investments 1,00,000 Prepaid Expenses 10,000

Long-te rm Borrowin gs 4,00,000

[Ans.: Quick Ratio =1.5: 1.]

Calculate Quick Ratio.

19. Current Assets t 6,00,000; Inventories t 1,20,000; Working Capital t 5,04,000.
[Ans.: Quick Ratio= 5: 1.]

[Hints: 1. Quick Assets = Current Assets - Inventories.

2. Current Liabilities = Current Assets - Working Capital.]
Capital t 2,40,000.
20. Quick Assets t 3,00,000; Inventor y (Stock} t 80,000; Prepaid Expenses t 20,000; Working
Calculate Current Ratio.
[~ns.: Current Ratio = 2.5: 1.]

[Hints: 1. Current Assets= Quick Assets+ Inventory+ Prepaid Expenses.

2. Current Liabilities= Current Assets - Working Capital.]

21. Current Liabilitie s of a compan y are t 6,00,000. Its Current Ratio is 3 : 1 and Liquid Ratio is 1 : 1.
Calculate value of Inventory. [Ans.: Inventory= t 12,00,000.]

y is t 36,000, find out

22. Umesh Ltd. has Current Ratio of 4.5 : 1 and a Quick Ratio of 3 : 1. If its inventor
its total Current Assets and total Current Liabilities.
[Ans.: Current Liabilities= t 24,000; Current Assets= t 1,08,000; Quick Assets= t 72,000.]
Current Assets and
23. Current Ratio 4; Liquid Ratio 2.5; Inventor y t 6,00,000. Calculate Current Liabilities,
Liquid Assets.
[Ans.: Current Liabilities= t 4,00,000; Current Assets= t 16,00,000; Liquid Assets= t 70,00,000.]
Test Ratio (Liquid Ratio}
24. Current Liabilities of a company are t 1,50,000. Its Current Ratio is 3 : 1 and Acid
is 1 : 1. Calculate values of Current Assets, Liquid Assets and Inventory.
[Ans.: Current Assets = t 4,50,000; Liquid Assets = t 1,50,000; Inventory= t 3,00,000.]
: 1. Find out the Current
25. Xolo Ltd:s Liquidity Ratio is 2.5 : 1. Inventor y is t 6,00,000. Current Ratio is 4
Liabilities. [Ans.: Current Liabilities = t 4,00,000.]

Ratio is 1 : 1. Calculate
26. Current Assets of a company are t 5,00,000. Its Current Ratio is 2.5 : 1 and Quick
values of Current Liabilities, Liquid Assets and Inventory.
[Ans.: Current Liabilities = t 2,00,000; Liquid Assets = t 2,00,000; Inventory = t 3,00,000.]

27. Working Capital of a compan y is f 3,60,000; Total Debts f 7,80,000; Long-term Debts
t 6,00,000; Inventories
r t 1,80,000. Calculate Liquid Ratio. [Ans.: Liquid Ratio = 2 : 1.]
= t 1,80,000}.
[Hints: 1. Current Liabilities= Total Debts (Liabilities}- Long-term Debts (t 7,80,00 0-f 6,00,000
2. Current Assets = Working Capital + Current Liabilities (t 3,60,000 + t 1,80,000 = t 5,40,000)
.

3. Liquid Assets= Current Assets- Inventories (t 5,40,000 - t 1,80,000 = t 3,60,000).]

\ccounting Ratios
4. 11 5
2s. Calculate Qu ick Ratio fro m the fol low ing :
Working Capital t 4,00,000; Tot
al Debts t 18,00,000; Non-C
urrent Liabilities '{ 16,00,000;
Prepaid Expenses t 10,000. Inventories t 1,90,000;
[Ans.: Qu ick Ra tio = 2 : 1.]
29- Quick Ratio of a com pa ny is 2 : 1. State, giv ing
reasons, wh ich of the fol low
(i) Improve, (ii) Reduce, (iii) No ing tra nsa ctio ns wo uld
t cha nge the Qu ick Ratio:
(a) Purchase of go od s for cas
h; (b) Purchase of go od s on
~ 20,000; (d) Sale of go od
cre dit; (c) Sale of go od s (co
s (co stin g t 20,000) fo rt 22, stin g t 20,000) for
000; (e) Cash received fro m
Trade Receivables.
[Ans.: (a) Reduce; (b) Reduce;
(c) Improve; (d) Imp rov e; (e)
No Ch ang e.]
30 . Quick Ratio of Z Ltd. is 1 : 1. State, wit h rea
son, wh ich of the fol low ing
(ii) Decrease or (iii) No t cha nge tra nsa ctio ns wo uld (i) Increa
the ratio: se
(a) Inc lud ed in the tra de pay
abl es wa s bill pay abl e of t
3,000 wh ich was me t on ma
(b) Debentures of t 50,000 tur ity;
we re con ver ted int o eq uit y
shares.
(CBSE 201 4)
[Ans.: (a) No cha nge (b) Increa
31. The Quick Ratio of a se.]
com pa ny is 0.8 : 1. State,
wit h reason, wh eth er the
increase, decrease or no t cha fol low ing tra nsa ctio ns wil l
nge the Qu ick Ratio:
(i) Purchase of loo se too
ls for t 2,000; (ii) Insurance
pre miu m pai d in advance t
on cre dit t 3,000; (iv) Ho no 500; (iii) Sale of go od s
ure d a bill s pay abl e of t 5,000 on ma
tur ity.
(CBSE 201 7)
[Ans.: (i) Decrease; (ii) Decrease
; (iii) Increase; (iv) Decrease
32. Capital Em plo yed t .]
20,00,000; Fixed Assets t
14,00,000; Cu rre nt Lia bili ties
Long-term Inv est me nts . Ca t 2,00,000. Th ere are no
lculate Cu rre nt Ratio.
[Hi nt: Cu rre nt Assets [Ans.: Current Ratio 4 : 1.] =
= Capital Em plo yed + Cu rre nt Liabilities
- Fixed Assets.)
33. Venus Ltd:s Inv en tor y is~
3,00,000. Total Liq uid Assets
are ~ 12,00,000 and Qu ick Ra
Current Ratio. tio is 2 : 1. Wo rk ou t
. k . ) Liq uid Assets (~ 1:?,00,0
[Ans.: Current Ratio = 2.5 : 1.]
(Hints: 1. 2/1 (Qu ic Ratio = - - - - - - - - -00)
Cu rre nt Liabilities -
Cu rre nt Lia bili tie s= ~ 12,00,
000/2.= t 6,00,000.
2. Cu rre nt As set s= Liq uid As
set s+ Inv en tor y= t 15,00,000
.)
34. Total Assets ~ 11, 00,
000 ; Fixed Assets ~ 5,00,0
00; Ca pit al Em plo yed t 10,
Long-term Investments. Ca 00, 000 . Th ere we re no
lculate Cu rre nt Ratio.
(Hints: 1. Cu rre nt Assets [Ans.: Current Ratio = 6 : 1.)
= Total Assets - Fixed Assets
.
2. Cu rre nt Lia bili ties = Total
Assets - Capital Employed.]
3s. From the
fol low ing info rm atio n, calcul
ate: (i) Cu rre nt Ratio; and (ii)
Qu ick Ratio:

Total Debt t
12,00,000 Long-term Borrow t
ings
Total Assets 4,00,000
16,00,000 Long-term Provisions
Property, Plant and Equipment 4,00,000
6,00,000 Inventories
Non-current Investments 1,90,000
1,00,000 Prepaid Expenses
Long-term Loans and Advan 10,000
ces 1,00,000
[Ans.: Current Ratio = 2 : 1; Quick
Ratio = 1.5 : 1.]